Larry Starr

And that's exactly what we are expecting "momentarily". Seriously, could happen any day now...... and it better!

Yeah, but I'm not going to guess. If he gives us an answerable question, I might answer. I save mindreading for my magic act!

First, always expand initials that are not all that common. Most people will not know what SCA means and that means they would probably just skip your question. As someone who has taught ASPPA courses on Davis Bacon/Prevailing Wage rules, I had to figure out what you were talking about myself. It hit me that you are talking about Service Contract Act coverage, right? Anyway, none of that has anything to do with your question. Your software is correct. To avoid that audit, split your PW plan into two plan; employees A-L in one (or January through June birthdays) and M-Z in the other. Now, you will have much longer before you get to the 120 participant issue. If you run the two plans as one plan with two divisions, you will find it very easy to handle and it shouldn't cost that much more in fees (just an additional 5500 really) other than the setup costs. All the additional costs this way are almost guaranteed to be substantially less than the cost of an audit.

What exactly are you talking about? What .5 weighting? I have no idea what that means.

I am attaching the 4/24 SBA / Treasury guidance called PAYCHECK PROTECTION PROGRAM HOW TO CALCULATE MAXIMUM LOAN AMOUNTS – BY BUSINESS TYPE. Particularly, take a look at Q 4 and how it calculated a partnership maximum. Note that it does not provide for including the employee allocation in the plan attributable to the partners (which is deducted on the 1040) and it specifically references the amounts to include for retirement (and health insurance) from the Form 1065, lines 18 and 19. Question 2 does the same for sole props with employees. How-to-Calculate-Loan-Amounts.pdf

If there are no contributions made, then there is no contribution considered in the deductible limits which is the same as there being no DB plan at all. Do you have some other issue of concern?

Mike, the issue presented is one of putting money into a plan during the year and having it allocated currently. You hypothesized doing an -11g during the 8 weeks. An -11g is clearly contemplated as a retroactive corrective amendment adopted for the prior plan year. While it might be possible to adopt it for a current year (for example, fixing an identified problem with BRF issues during the year), I don't see how you can do an -11g amendment during the 8 weeks that deals with the problem of making the contribution allocable within the 8 weeks now running. And if you could do it, wouldn't it just be an amendment, not an -11g amendment with all the rules attributed to that section? Am I missing something?

Newest release from SBA today; no one who got under $2mill for PPP has to worry about "necessary" issue. 46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request? Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

Ummmm.... it couldn't hurt! Help what?

It's not an RMD (as noted, there is no such thing in 2020), have the plan call it a CRD (Corona Related Distribution): The distribution will be exempt from the 20% mandatory tax withholding that generally applies. Your recordkeeper may withhold 10% from the distribution for income tax purposes, unless you elect otherwise. If the employer is not comfortable with that, have them make a direct trustee to trustee distribution to the 83 year old's IRA (or go set one up at the bank; there is now no max age) and then take it out of the IRA with no withholding. And, as I remind clients all the time, withholding is NOT a tax (it's not "withholding tax"); it's an advance payment on your possible tax liability and if you are overpaid, you get it back, and if you are underpaid, you owe the balance and possibly a penalty for being underwithheld. Ultimately, you are going to have to pay the tax, so elimination of withholding is not necessarily a good thing for many taxpayers.

I doubt that an RMD (single payment) can be classified as a monthly pension; therefore, it would not reduce the benefit in Georgia. How do you read this otherwise? I'm not sure what your last sentence is intended to add; working part time don't appear to fit the statement of "and as such, get laid off". But I don't think it matters what that last sentence means since the issue is the effect of payments from the plan on unemployment benefits, not the effect of WORKING on unemployment benefits. FWIW.

That has been my argument from the evening they dropped that bomb. We sent that same concept to the powers that be and maybe that will also be "fixed" in the next bill (if there is ever going to be agreement again between the house and senate). The bill introduced yesterday by Nancy is 71 pages FOR THE SUMMARY of an 1800 page bill! I read the complete summary; it was depressing.

Maybe because I am an Enrolled Agent with the same authority as a CPA except for audit ability, I have no problem making a recommendation. But (as said a bunch of times in other messages), while I believe the rule does mean that 100% of the contribution to any plan during the 8 weeks will "count" towards the 75% requirement for forgiveness, I tell all clients that this is our best guess and we really don't know what the rules will be because they haven't been issued yet. Therefore, hold off putting ANYTHING in until you are at least 6 weeks into the 8 week period, with the hope that we will have additional guidance by that time. And if we don't, it's a crap shoot right now. And any other accountant or lawyer who says they know what people should do will possibly be guilty of malpractice if their conservative advice (say, pro-rate the contribution) turns out to make them ineligible for full forgiveness. This is dangerous territory to do anything but hedge your comments.

Currently (until they change it) it is the contribution made in the 8 weeks that counts toward forgiveness. I doubt that eliminating the last day rule does anything since it is unlikely that anyone has 1000 hours at this point or will have if the 8 weeks is already running.

As usual, payroll company is wrong; that clearly is NOT the "default" (one would ask "default? Say's who?"). FFCRA paid income is indistinguishable from any other income. Unless the specific definition of comp in some way excludes sick pay, it should be treated the same as any other compensation for deferral purposes. See this from IRS FAQ: https://www.irs.gov/newsroom/covid-19-related-tax-credits-special-issues-for-employers-faqs#special_issues_third-party 54. Can employees make salary reduction contributions from the amounts paid as qualified leave wages for their employer sponsored health plan, a 401(k) or other retirement plan, or any other benefits? The FFCRA does not distinguish qualified leave wages from other wages an employee may receive from the employee’s standpoint as a taxpayer; thus, the same rules that generally apply to an employee’s regular wages (or compensation, for RRTA purposes) would apply from the employee’s standpoint. To the extent that an employee has a salary reduction agreement in place with the Eligible Employer, the FFCRA does not include any provisions that explicitly prohibit taking salary reduction contributions for any plan from qualified sick leave wages or qualified family leave wages.

No, they are not self-employed. They get a W-2. You know that; your question confuses me somewhat. Am I missing something? NEVER MIND OOPS! Never mind: what confused me was the double negative. You are correct, they are employees and their retirement allocation counts.

No, I don't think so. I KNOW SO. And I'm pretty sure I also saw it somewhere in something. But no doubt anyway. It applies to all self-employed.

OK; here are the rules. I have attached the SBA release that covers the issue. See P. 11 of the attached, which is III 1 f i, which says the following (note highlighted words). There is other guidance where it actually tells you where to get the numbers that go into the application amount, and it specifically includes the employee cost on the Schedule C, but specifically excludes the self employeds' contributions for retirement plans that is on the 1040. f. What amounts shall be eligible for forgiveness? The amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest. The actual amount of loan forgiveness will depend, in part, on the total amount spent over the covered period on: i. payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee (for eight weeks, a maximum of $15,385 per individual), as well as covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums); CARES Act. Interim Final Rule Self Employed.pdf

I understand your position, but you can't say it was clearly what was intended since they clearly allowed 100% of the employee contribution on the schedule C for a sole prop to be included in the application side (the determination of monthly comp). We shall see how it shakes out. I think it best to assume they didn't think about what they intended!

You found a nice Q&A, but it has nothing to do with this topic. I'll get everyone the reference when I am in the office shortly. This is addressing whether payments made by the business to non-employees counts in the payroll; of course we know it doesn't but I guess there were some people who needed to see it in writing! And no, it doesn't mean they count for forgiveness (that's just plain silly!). Those people who get the revenue as independent contractor will have their own ability to apply for PPP and have their own rules for forgiveness.

Are you saying that you know of some states where this is already the case? That is surprising; there shouldn't be a connection except for those plans that actually replace income with a monthly check (called a defined benefit plan with participant in pay status!).

There's a lot that ISN'T right about PPP. A restaurant that got PPP money can't open for the next 8 weeks because the local jurisdiction won't authorize at least 75% occupance (which is the MINIMUM that almost any restaurant needs to make a profit). How can they spend the money on salaries in the 8 weeks from the date they obtained the funds? Answer: they can't. Doesn't feel quite right, does it? How come I (as the sole STOCKHOLDER) of a C Corp get to count my entire retirement plan contribution toward the PPP money, but if I was a sole prop, I can't count one penny? Doesn't feel quite right, does it? I think you are actually being more "aggressive" than I am. I am telling my clients to put in NOTHING during the first six weeks of the current 8 week rule, with the firm hope (and strong belief) that we will (we have to) get more clear guidance. If the guidance is "bad", then they have conserved their cash and can use it elsewhere. If it is good, they can throw all the money that they want for their plan (but again I suggest no more at this point than would meet at least the 75% test and possibly the 100% test). Because there are also the other two rules that have to be met (number of employees employed and determination of any reduction in pay of the workers), and because there will be additional guidance there as well (just the other day they confirmed that someone who was called back but doesn't return counts as someone who is actually employed for purposes of the employee count test! CRAZY! But necessary!!!), until we know all the rules on forgiveness, we really know nothing very little about forgiveness where businesses CAN'T open by operation of local jurisdictions. This is really the definition of SNAFU with regard to government programs that are supposed to "help" people. Think of Johnson's Great Society and how it hobbled several generations of disadvantaged citizens.

I don't know who said that on the online conference (I'm so busy doing free webcasts I have no time for our non-free ones!). But I am willing to bet big bucks that we will get more guidance, because we have to! The banks that handled the SBA loans are the entities that have to adjudicate the forgiveness; they simply cannot do it at this point with the information that has been provided so far. PERIOD. There has to be more guidance; there just is no option. Of course, what we don't know is what that guidance will be. SO FAR, they don't appear to be limiting anything on the payroll equation except the $100k annual comp limit and the disallowance of any retirement or health benefits for sole props or partners. I too have seen all those opinions; I just believe that none of them are right. They are being way too conservative and will cost their clients money; watch for possible lawsuits against advisors for BAD ADVICE that didn't have to be bad advice.

I think you should tell us what PRN means; don't assume abbreviations are understood. Do like they do in good reporting; expand it the first time; your reader shouldn't have to google it to understand your question. Google shows this: p.r.n.: Abbreviation meaning "when necessary" (from the Latin "pro re nata", for an occasion that has arisen, as circumstances require, as needed). So, this is the problem of an employee who has quit working (let's say he retired) but comes back sometimes to help out. Each time he comes back he is a rehired and needs to be treated as such. If he is past NRA, then he's also going to accrue benefits in almost every plan, regardless of the number of hours he works. You need to treat him as a rehire, and depending on the amount of time between his termination date and his rehire date, you act accordingly on the loan. QED!?